Friday, 18 October 2013

Chipotle Q3 2013 results

During the quarter Chipotle generated
revenue of $826.9 million, an increase of 18% from the third quarter of 2012.
Comparable restaurant sales grew by 6.2% in the quarter and diluted earnings
per share increased 17.2% to $2.66

Sofritas is an organic artisan tofu that
is braised with chipotle peppers, roasted poblanos and a blend of aromatic
herbs and spices. The company is encouraged by what they are seeing with
Sofritas so far. It currently accounts for over 4% of sales in the restaurants’
where it’s offered.

About 50% of Sofritas sales seems to be
coming from vegan and vegetarian customers and about 50% coming from customers
who are substituting Sofritas for meat options. Chipotle’s Chicago, Baltimore,
Philadelphia, Richmond and Washington D.C. restaurants will begin testing
Sofritas on October 21st and by the end of the year, the company plans on
having over 650 restaurants serving Sofritas or about 40% of its total
restaurants.

Chipotle’s efforts to replace GMOs in food
with non-GMO ingredients is an important focus for the company in its ongoing
quest to improve the quality of ingredients. There is considerable debate right
now about the environmental, health and economic implications of GMOs in food
and more than 60 countries have restricted or prohibited certain GMO foods.

In March, Chipotle became the first
national restaurant company to voluntarily disclose the presence of GMOs in the
ingredients used in their restaurants. The company also opened its first
Chipotle in Frankfurt, Germany bringing the total number of international
restaurants to 14.

Chipotle’s same-store sales were up 6.2%
in the third quarter and average sales volume for restaurants that have been
open for at least 12 months is $2,140,000, the highest that it’s ever been.

Overall sales for the quarter increased
18% to $826.9 million driven by new restaurant openings and a comp of 6.2%. Year-to-date
sales were $2.37 billion, an increase of 16.7%. The quarter and year-to-date
comp increase was driven by increased customer visits.

The company expects to end the year with
total new restaurant openings at or above the high end of 165 to 180 opening
range and in 2014 in light of its strong real estate pipeline, Chipotle expects
to increase its restaurants openings to a range of 180 to 195 new restaurants.

And new restaurants continues to perform
very well and as a result the company now expects opening sales volumes in the
$1.6 million to $1.7 million range, up from its previous expected range of $1.5
million to $1.6 million.

In the quarter other operating cost
primarily from higher marketing cost, which were 1.55% in the quarter, up 15
basis points from last year and year-to-date were 1.4% or up 30 basis points
from last year.

The company expects marketing to be at a
similar level in the fourth quarter and to step up to around 1.7% in 2014.
G&A was 6.4% in the quarter or 50 basis points lower than last year and
remember that last September the company held its third biennial All-Manager
conference which will also occur in 2014. The conference cost about $5.5
million in 2012 and will cost an estimated $7.5 million to $8 million next year
and so Chipotle expects about 2,300 managers and support staff to attend.

The company expects its effective tax
rate for 2013 to be 38.9%, in 2014 the tax rate will rise to about 39.9%
without the benefit from the work opportunity tax credit and the R&D tax
credit. If these credits are renewed by Congress for 2014, the rate will be
lower by about 50 basis points.

During the quarter Chipotle repurchased
about $17 million worth of its stock or over 41,000 shares, an average share
price of $402. At the end of the third quarter, the company still had nearly
$103 million left on share buyback program previously approved by the Board and
over the last five years, Chipotle have invested nearly $600 million to
purchase about 4 million shares at an overall average price of $148 per share.

Chipotle finished the third quarter with
over $835 million in cash and investments with no debt on the balance sheet and
the company continues to believe that the best use of its cash is to invest in high
returning restaurants and will continue to plant seeds for future growth
including ShopHouse and Chipotle outside the U.S.